» VIEW ALL POSTS May 16 2008   9:41AM GMT

Portland’s busted SAP implementation



Posted by: JackDanahy
Tags:
SAP

There is a growing number of failed SAP public sector deployments, ranging in scope from the Los Angeles Unified School District (LAUSD) megadeal to the smaller Burnaby, B.C. project. Now the city of Portland, Oregon can be added to that list. A city analyst has revealed to the media that Portland’s SAP project, budgeted at $31 million in 2006 for a 2007 go-live date, is now estimated to be nearly $50 million and won’t be complete until 2009. Portland has fired its systems integrator, Ariston Technologies and Consulting, and is working directly with SAP services to get the system up and running.

It isn’t clear who’s to blame for the cost overrun and project delay, but Portland and Ariston will no doubt implicate each other in time. The soundness of the underlying SAP software itself has not been questioned by either party.

One of the interesting features of Portland’s SAP implementation is the claim, made in a budget document back in 2004, that:

“Users are aware of the many recent developments in ERP software that they feel would better serve their needs. Staff specifically cited on-line real time queries as a high priority as well as the ability to drill down or summarize data. Most said that the staff time spent compiling financial information from various sources in different formats outweighs the cost of a new system.”

While it’s impossible to argue over the merits of the business case without access to all the numbers, it seems highly unlikely that improved data reporting capabilities justify a $50 million expense (to say nothing of maintenance costs for years to come). Of course, there’s also the benefit of getting rid of Portland’s old legacy systems, but how expensive can these be? In the case of Washoe County, Nevada, another SAP ERP customer working with Ariston, 23 interfaces costing between $15,000 and $20,000 each were ditched after implementing SAP. Call it a half million in savings.

Granted, enterprise applications investments are not always about immediate hard cost savings. For many companies, the investment is strategic: for example, it enables them to remain competitive, keep pace with the data demands of their ecosystem, or achieve long-term efficiencies in front and/or back office processes. But the public sector is not the private sector. Portland isn’t in competition with other city governments, and its main job is to provide basic services that governments have successfully provided for thousands of years before the advent of software. It’s very easy to understand why blue-chip private companies such as Coca-Cola or Bank of America would go with SAP and related applications investments, because the investment allows them to do things they couldn’t even contemplate before (such as smart picking in Coca-Cola warehouses). It’s no so easy to understand why city governments are eagerly disbursing tens of millions of dollars for software for enterprise software.

There’s a reason it’s called enterprise software.

Demir Barlas, Site Editor

18  Comments on this Post

 
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  • JackDanahy
    Their SAP implementations failed because they employed unskilled workforce. This goes to the so called Big 5 as well, they're no better. You will get what you pay for. And if you pay $200/hr to those "consultants" from countries where there's no electricity or running water you are ripped off. Wake up.
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  • SAP consultant
    This doesn't surprise me, Ariston sells themselves as being the largest SAP Public Sector consulting firm. It makes you question the consulting firm and what went wrong, espcially if you look across the river and they were running the SAP Implementation in Multnomah County, in Portland. Ariston had their Project manager abrubtly quit last October 2007. Companies need to investigate the consulting firms more and hold them responsible for the implementations.
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  • JackDanahy
    Dear Editor, it would be easy to take a pop at any of the players involved in the Portland situation you have reported. However, there is a paucity of information, and certainly not enough to pass judgment. However, there are some legitimate comments that should be aired. First, ERP systems are not limited to commercial users, and there are many successful local government implementations. Second, if the SAP software [applications] are not being questioned, then the problem lies with the implementation - from concept through planning to execution. Third, projects do not become tragedies overnight, and someone owns the responsibility for monitoring, management and corrective action. I would like to have the facts about (a) the level of software customisation, and (b) how the Portland processes were harmonised with the SAP standard applications - my expectation is that herein lies the problem. Ken Gorf, CFO, West Trax International.
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  • JackDanahy
    I have seen two such cases in Australia too. In both cases, the implementation of SAP was supposed to finish in max 2 year. 4 years later, it was not done even half. In my openion, in both cases, the consulting company took advantage of the lengthy discussions about what to acheive to blame. In both cases, consulting company hired un-experienced developers + were greedy excessively to leach on the mony. In at least one case, the consulting company died as a result.
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  • JackDanahy
    One big issue lies with all ERP Software is about the implementation ,i mean using the options available with respect to the business process.Many a times business process of the companies are not properly identfied which increases the implementation time and also failures.
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  • JackDanahy
    I didn't like the comment what realskill wrote. It seems like he needs to wake up and Learn that world is Flat. Countries and Companies stand because of diversity. This Country was established by the people around the world. Well may be he has Running water in his house but certainly he has $6000 average debt on top of his head.The United states has deficit that come close to $6000 per head in the US. Well May be Those people without Electricity has about $300. Now Who is ripped off? Sorry the Question here Why the project failed? There are millions of reasons.It won't take too long for them to find out. Because they Have me from now.
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  • Manoj K Sharma
    Ariston has a reputation with successful SAP implementations.This failure can be a result of taking certain important factors for granted like the business blueprint and analysis of processes.They need to be questioned for the skill they used.If they were unable to deliver it in 2007,what magic they gonna do in 2009.
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  • JackDanahy
    Dear Editor, IT projects fail or succeed not in the implementation phase but rather in the definition phase. This phase is completed even before the client issues an RFI or RFP In this case as in other public sector projects I was involved with the definition was: “Users are aware of the many recent developments in ERP software that they feel would better serve their needs. Staff specifically cited on-line real time queries as a high priority as well as the ability to drill down or summarize data. Most said that the staff time spent compiling financial information from various sources in different formats outweighs the cost of a new system.” The problem in reality is there are too many reporting schemes: The information required to produce a report is located in different systems and worse sometimes it is the "private property" on one persons C: drive. So the project is a major transformation of the business processes of the organization that is masked as an ERP project and then is allocated to the lowest bidder with a project scope that is poorly defined and includes extra pay for developments and these unscoped unknown developments that skyrocket the projects cost. Using an ERP consultancy to do a major reorganization of the client’s bossiness processes is the source of failures and cost overruns of a project and not the vendors skill set.
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  • JackDanahy
    Let’s put this into perspective. Our company implemented SAP at our locations in Portland, Kansas City, Tennessee, Canada, Brazil, six countries Europe, and our new plant in China, all on a single instance of SAP for around 16 million dollars. This also included the installation of a worldwide network. We implemented: Finance / Controlling, Manufacturing, Sales and Distribution, Warehouse Management, HR, Plant Maintenance and BW. We had to deal with various countries local laws, cultures, languages and localizations, especially with Brazil, China and Russia. The City does not build anything, they really don’t add value, they just need a good accounting system to take the money away from their citizens and piss it away. This story shows the incompetence of Government at its best. The public sector is incapable of dealing with the realities of the real world since if they need money they just take it away from hard working people.
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  • JackDanahy
    From reading the abovev article, it is clear that not enough time was takeninto gathegring the requirements/ needs of Portland. Very key to this is, would include a clear definition of the processes involved. IT and any ERP software is basically an enabler or better put a duplication of what would otherwise be done by legacy or manual systems (basic recording, analysis and presentation of information in the organisation). As the size of the organisation increases, so does the quantity of information that needs to be tracked. Most times companies under estimate the amount of in house study that needs to be done to understand their own processes and many a time, consulting companies that are brought on board will assume even the minute(st) of detail will not significantly inpact a tried a tested methodology of implementation. Both organisations can blame one another, but that does not mean that the next guy to get on with the implementation will not fall in teh same trap. I would imagine that by the time Portland has numerous legacy systems, than there must be alot of un synchronised information across the organisation. All in all from the word go, scoping, team formation, requirements gathering, planning, study and design were not fully covered in the project and as such, even if they hired the best consultants, i would not expect any success as per project timelines.
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  • Cc
    Smartskill, IMO you are incorrect. Despite the Friedman's of the world statements, the world is NOT flat, never has been. You do get what you pay for and often as not consulting companies are not willing to pay experienced consultants and hire less experienced ones, which today are likely as not to be offshore. I live in Portland and it is clear from reports here that as usual the fish stank from the head down. The Portland management went for the lowest bid and they had a contract that was not honored, because after the fact the costs went up hugely. The consulting company said that the Portland City managers changed the goalposts. Interestingly, the final numbers now are around what other companies not chosen originally bid. Portland went for the cheapo solution and paid the price. The situation is not much different than the mid-1990s when because of a paucity of SAP skills any w/a certification were hired. Nowadays that seems t/b replaced by anyone who is cheap. It is not 'free trade' it is 'free labor' or better described 'cheap labor'.
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  • Cc
    B Brunetto, I live in Portland and the city does not have a history of wasting money. They, like all corporation have had some big failures, not much different than any large organization, e.g. military, corporations, governments etc. E.g. Portland has a history of bringing in their light rail projects ahead of time and under budget again and again. Cities do not 'piss away' taxes as you maintain. Instead they build infrastructure so that we have a place to do business and make a living. In Portland, government is not the enemy, it is the solution (as in most cities). W/o a 'commons' there would be no business, commons cost money. Taxes are not evil, just go to some third world countries and look at what a lack of infrastructure gets you where taxes are not paid or not collected.
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  • SAP consultant
    If it was not for the consultants from the country with no running water and electricity half of this country's implementations would have been utter failures. Keep in mind, other countries are much better at generating qualified technical profressionals. So keep your low billing rate frustration to your self and try to get enough facts and figures before blurting out your frustration. Ask CIO of any reputed company if they can run thier company if people from the coutries you are saying decide to return. SAP Consultant.
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  • JackDanahy
    Any software implementation will require adjustment of business practices to the capabilities of the software. The larger the system, the greater the adjustment required. Governmental entities are in far less control over their business rules than private companies. In many cases, political, regulatory, or legal concerns will not allow the necessary adjustments in business practices in order to use the software effectively or at all.
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  • JackDanahy
    SAP implementations fail or succeed due to one factor. People. Good people = success. Bad people = failure. If the staff employed by both the implementer and the organisation implementing know what they are doing and have a commitment to success it will always work. Oh and one last person - a great leader.
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  • JackDanahy
    Don't waste your time speculating. You'll make unwarranted and unsubstantiated guesses. We must be presented with both sides of the story and provided with all the facts! Since we're not privy (yet) to the facts you can't do the forensics and you'll try until the cows come home. As interesting as this is, don't your time. Perhaps someone could look up the court documents and/or transcripts and report from these! In my experience, it's not the SAP software that's at fault. In very, very general terms, it starts with how in-depth the scoping exercise was, what was promised in the resultant statement of work, chemistry and personality mix of clients and consultants, etc. The products from these sets the stage for what comes next!
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  • JackDanahy
    Government = higher probability of failed projects. Government bureaucrats are always far more inefficient than private sector. The story is bigger than consulting companies, cheap labor, requirements gathering, or software problems: it's the government in comparison to private sector. Read the 1st sentence again: There is a growing number of failed SAP public sector deployments... Think about it when you go to vote. What's better: higher taxes and bigger government OR lower taxes and bigger private sector. Yes, I know there have been failures in private sector, but it's nothing compared to numbers and amounts of government failures since Marx and 1867.
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  • Sekemartheerp
    RealSkill and CC , I appreciate you guys taking nice shots at the problem . I did implement several SAP projects and from my experience . I will list a few reasons why a SAP implementation fails 1. Bidding process involves a Sales person from Consulting side and a Senior managers from the Client side . Both of them don't have any clue what SAP can do and cannot and they come out with this magical numbers that they expect the consultants to meet the target. Mind you, the $200/hr is charged by the consulting company is eaten away by the consulting company and the consultant will gets a very little cut from the deal. 2. most of the Project Managers in failed projects primarily work with Spreadsheets they might have never worked with SAP and has a very little knowledge of SAP , they interveiw the candidates and bring some sweet talkers without stuff on to the projects who charge the hours but does nothing ...Typically they spend time talking about their flight home and steak they had the last night.I have seen this in some of my projects. 3. Finally there is always a chnage of business decisions in the middle of the project which needs a scope change that adds more burden to the project. My dear realskill , "You will get what you pay for. And if you pay $200/hr to those “consultants” from countries where there’s no electricity or running water you are ripped off" ... These people are hungry and they work hard to keep their jobs so that they can have electricity and water when they go back home . The ones who rip you off is the one who enjoys steak and wine on the company's perdigm and always bothered about taking the next flight going home. Realskill I am amazed at your ignorance get in to the real world with real skill
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